How many key accounts do you have and who are they? It sounds like a straightforward question, but you’d be astounded at the number of managers who will either state a number that’s way too high or be unable to name their key accounts. And if you can’t name or count your key customers, you’re probably not genuinely managing them as key accounts, warn Malcolm McDonald and Diana Woodburn, leading authorities on marketing and co-authors of Key Account Management: The Definitive Guide (Butterworth-Heineman, 2006). As you plan for 2008, take a hard look at your key account program, taking into consideration these points: 

– Regardless of your organization’s size, you should have between 15 and 35 key accounts. Anything above 50, and certainly any number with three digits, is far too many. 

– Selection criteria for your key accounts should consider the customer’s potential with your company, not just what it is being delivering today. Best practice companies work with a three-year time frame. “If you overemphasize current size or profit,” say McDonald and Woodburn, “you will put too many resources into customers whose lifecycle is maturing and under-resource those who can grow.” 

– Always choose key customers that are aligned to your corporate strategy and, therefore, will make a major contribution to its achievement. Resist pressures to dilute your key account program with customers who don’t meet specific criteria and whose agendas do not align with your own.

– Whether a customer will respond to key account management depends on their view of your company. You cannot guess at their view and you can’t ignore this important component. Know what they think – ask them.

With these guidelines in mind, now you’re ready to start grouping your key customers according to the way you intend to treat them and what you can expect from them. To do this, create a matrix with four quadrants. The vertical axis of your matrix should be called “key account attractiveness” and should run from low to high. The horizontal axis is “supplier’s relative business strength as seen by the customer” (i.e., the customer’s view of your company relative to your best competitor) and runs, left to right, from high to low. Divide the matrix into four equal quadrants and you’ve got a physical representation of your four main categories of key customers. These are:

Star Customers. This is the upper right quadrant. They are your strategic customers of the future. You rate them highly because of their potential for growth, but they don’t do a lot of business with you now. Your job is to find out why and create a plan for boosting business with them.

Strategic Customers. This is the upper left quadrant. You already do a lot of business with these customers and should continue to invest in bringing them new value. Your most innovative and important projects should be developed with these customers.

Status Customers. This is the bottom left quadrant – they do a lot of business with you, but their attractiveness as a key customer is low. Likely, their market or business is mature and unlikely to grow. Treat them well since they probably contribute a significant percentage of your revenue, but don’t lavish your most innovative ideas on them. Manage costs carefully here.

Streamline Customers. This is the bottom right quadrant. They are “key” because they give you a lot of business and perhaps your company feels it needs the volume. If you must maintain them as key accounts, manage the costs very carefully and make sure the gross margin is positive, even if it’s not large, say McDonald and Woodburn.

When you plot customers on your matrix, plot them as circles sized according to the amount they spend with your company. Resist the urge to “list” them since lists suggest having a top and bottom – a best to worst – and because with a list you’ll tend to make decisions about key customers individually rather than “via a proper view of the key customer group,” say the authors.

Finally, keep in mind as you dig into the details of our key account program that you’re probably going to run into some internal resistance when one customer or another is not included in the program. This is natural. “Selection of key accounts is often a contentious issue as it obviously involves the non-selection of some customers that give the company substantial amounts of business currently and/or customers that are important to particular individuals,” say McDonald and Woodburn. They urge you to stand your ground. When customers are called “key” for the wrong reasons, they dilute the entire program.

For more information, visit www.malcolm-mcdonald.com.